Is it prudent to buy insurance for a spouse who does not earn?

Insurance and risk management is as old as trade and exchange of goods for money. Common sense dictates that when there is a risk it’s wise to distribute or transfer the risk to a wider community. Insurance dates back to the early ages of trade & finance.

 Changing life scenarios-

Of all the milestones in your life , you would definitely remember your first pay cheque!    It was a wonderful feeling of independence and ownership. At the age of 20-25 , you expect a successful career , travel the world , provide for your ageing parents and look forward to starting your own family.

Things change once marriage is on the cards, your responsibilities will start to increase and suddenly there are additional members to be taken care of. Just as you begin to make time and space for your wife and kids you need to upgrade your insurance plans too .. you need to have them financially secure incase of unfortunate events. In general all  insurance offers the below benefits :

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Incase of your spouse working , the income supplements to the household income. If not , she is even more indispensible at home. Many women choose to let go of an existing career in order to raise children and manage the domestic issues , or change timing of their professions to accommodate the family requirements.  Consider that the husband and wife form the two essential tires that move the vehicle ahead. When one is not there , the other bears the whole burden of taking the family ahead.

In such a case, how does insurance compensate for the loss of a non-earning family member?

• The money received as a compensations can help secure the additional help required to sustain the workings of a household.
• The money can be invested for the children’s future expenses
• It can be used to pay health and hospital bills if any
• It can be used to secure additional insurance and health policies
• It can be used to pay off existing loans or for relocation

2. The first insurance policy

It starts with your first insurance policy . Your first policy always needs to be started as early as the first payday. If not , the first year of career . Starting early cultivates the habit of saving and risk mitigation and tax planning. Although there are less dependents at that stage  . Now consider the below illustration , it provides reasons for opting for an insurance.  Once you have chosen an insurance policy , ( term / life / endowment ) you must chose the riders carefully . Pay premiums and keep the policy active. But it doesn’t end there .

All policies will require you to nominate ( inclusion ) of the beneficiary  . Inclusion works in order to maintain family continuity. This continuity can be made smooth , dignified and less burdensome in terms of money.  This means you have covered your dependents to cope with any loss that may happen in your absence. However , there is another side to the coin . How will you cope with the loss if any and ensure continuity and progress?

3. You & your new family –

So , how do you include your family under the finance umbrella?

• Update your bank accounts , insurance policies , lockers to include all members
• Assign nominees – Although adding a nominee doesn’t allow inheritance it allows access to operate banks / lockers in case of loss of life.
• Appoint an agent or an agency to manage your investments , tax filing , insurance , property matters
• Keep update all assets and liabilities by making a detailed list of belongings and loans and payables ( credit cards etc )
• Plan for savings & expenses

4. Goals and future plans :

                 Even during the first year of marriage , it may be difficult to adjust to providing for an additional person. If your spouse in dependent completely on you then its wise to plan the following;

1. Discuss openly the long and short term financial goals with your partner
2. Try to secure a second income to supplement current income
3. Start a joint savings account and keep track of expenses
4. Create an emergency fund
5. Incase of unstable job scenario , atleast 3 months pay should be kept aside for emergency .
6. Take term insurance policies for both partners

5. Unity & inclusion

Any long term goals can be achieved only with unity and harmony. If the efforts are joint and work as a team then both partners will become enabled to function without fear.

Insurance plays the role of a risk manager here. It is observed that the mother’s death is often more devastating to the family unit.  I believe there are usually several reasons for this.  Two of the main ones being that, not only are mothers often the relational nurturer, but they are often the ones that run the household and keep everything in order.  This is true even in households where both parents work outside of the home.

Yes, the loss of their father would have hurt deeply, but the family and children for the most part, remained consistent and stable providing a sense of security in an insecure time.  Now,  couples are often advised , where one of them is considered a non-earning spouse, to take atleast a minimal term insurance or life insurance policy .So their  family will be financially secure in the event of either spouse’s death, but that they will be emotionally and spiritually secure as well.

The Bottom Line

Although it is not likely that as much insurance will be required for the non-working spouse as for the breadwinner, the loss of the homemaker is just as difficult to deal with in many respects. Many needs must then be met and paid for in order for the family to continue to function. Proper life insurance coverage for homemakers should therefore be an integral part of any financial plan.

Sneha Ramamurthy

Dilzer Consultants Pvt Ltd

Credits :

http://economictimes.indiatimes.com/tdmc/your-money/how-insurance-needs-change-at-every-life-stage/tomorrowmakersshow/58514061.cms

http://www.cbn.com/finance/scalici_spouseinsurance.aspx?mobile=false

http://www.investopedia.com/articles/pf/08/insure-homemaker.asp#ixzz4jDKdoQVH

23 June 2017